The story of pension system and administration in Nigeria has not been a kind story for many especially before the emergence of contributory pension system berthed in Nigeria in 2005 couple of months after President Olusegun Obasanjo accent of PRA 2004, after a studious x-ray of how it works in Latin America from where it has been adapted by many countries including Nigeria.
Before Pension Reform Act 2004 became a statute, approaching pension time was seen as entering a stretch of difficult time and a possible ultimate slump on the pension queue. But despite the tremendous transformation of contributory system, the scare of the pre contributory pension system still lingers.
The President Pension Fund Operators Association of Nigeria, Mr. Olumide Oyetan captured the plethora of descriptions of the pension scene before the emergence of the current pension that is operated by Pension Fund Administrators, Pension Fund Custodians and Closed Pension Fund Administrators. These operators in the pension industry were assigned a rescue, transform, restore confidence and build the economy the spiral down mode of the pension industry notwithstanding.
The assignment by statute was a tall order and Oyetan who was there from the beginning, left and returned said the landscape was free of acceptance by contributors in both the public and private sectors save from the Federal civil servants and multinationals, the later preferred a closed system for their staff and it was granted by law.
The rest of the private sector were either unfunded, underfunded or was not existent. From day one when the PFAs started operating no one had a pension retirement savings account RSA. “We went to different companies both public and private to convince contributors to register” but interest was far away from the initial talks. “We were like evangelist saying there is a new contributory pension system but people were not interested” and he attributed this to the terrible pension experiences of retirees where funds were stolen. However, he said the evangelist PFAs had to convince contributors that it was not a government run scheme and there was a system built in to secure the funds and manage it to earn returns for them when they retire and are due to have the funds for their retirement years.
This initial assignment he recalled, lasted for about two years with no money coming in save for trickles. He recounted that most of the work in the two formative years were devoted to going round and dropping forms for people to fill. However, he noted that immediately after this dry era, “all of a sudden people started saying lets give it a chance since there was no other option. They decided to give it a chance and we have gone this far now. But we cannot be complacent. We must stand as the administrators and custodians of the fund and we have to do it together.”
On the trail of transparency and trust built into the system, said that the PFAs administer and invest the money and the custodian hold the fund in trust. This recalled is an aberration because it is peculiar to Nigeria, in no other country do you have such a structure. Why was it so he retorts, “its because of where we were coming from, the abuses, the pains and the sad experiences of retirees.”
To avert a reoccurrence of stolen pension funds he said the present scheme has a PFA that administers and invests while the Pension Fund Custodian holds the funds, these two operators are separated and independent of each other in operation. Under the new system its impossible for either of these fund operators to abscond with the pension fund. Completely ruled out.
“In the new system there are systemic safeguards and we must continue to promote it.” Noting that the system has been working and committed to paying retirees as it falls due, he said that his company Stanbic IBTC PFA, where he presides as the Managing Director, has paid over N1trillion as pension benefits till date. Aside this, he said the PFAs provide funds as approved by statute to vital sectors of the economy. He says with confidence that the pension industry has become a formidable force to grow the economy without compromising the safety of funds and also, guaranteed returns for contributors with over N17 trillion in assets under management. This he cleared has qualified the industry as the bedrock powering the country for sustained growth.
